China’s Strategy to Become a World Manufacturing PowerChallenges and Opportunities for the European High Tech Industries.
SEMI Europe Webinar, January 27, 2017
© WeichertMehner GmbH & Co. KG, 2017
China M&A deal value as Percent of total global M&A deal value
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016
1%2% 2%
6%5% 5%
6% 6%7%
11%12%
29%
China’s Strategy to Become a World Manufacturing Power4
Source: www.dealogic.com
China M&A deal value as Percent of total Asia Pacific M&A deal value
China’s Strategy to Become a World Manufacturing Power5
0%
10%
20%
30%
40%
50%
60%
70%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016
10%15% 16%
32%
26%22% 22%
26%
37%
49%46%
65%
Source: www.dealogic.com
Acquisitions or Participation of Chinese Companies in Europe (total numbers)
China’s Strategy to Become a World Manufacturing Power6
Source: Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft: Chinesische Unternehmenskäufe in Europa, Juli 2016
020406080
100120140160180200
2006 2007 2008 2009 2010 2011 2012 2013 14 2015 Q1 2016
4051
61
85 9199
119138
165183
164
In the first half of 2016, companies from China in Europe have made a total of 164 acquisitions -about as many as in 2014 as a whole and only 19 less than in 2015 as a whole.
Acquisitions or Participation of Chinese Companies in Europe (total numbers)
China’s Strategy to Become a World Manufacturing Power7
0
20
40
60
80
100
120
140
160
180
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016
60
78 72
9382
101
164
The half-year comparison shows a sharp increase in activities in the first half of 2016. The number of deals has doubled compared with the previous year.
Source: Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft: Chinesische Unternehmenskäufe in Europa, Juli 2016
Reasons of Chinese M&A in Europe
The motives, targets, locations and sectors for Chinese acquisitions are increasingly diverse.
Yet, strategic asset seeking acquisitions aiming to strengthen global competences remain pivotal and …
The acquisitions are related to Chinas master plan “Made in China 2025” …
China’s Strategy to Become a World Manufacturing Power9
Made in China 2025
China's State Council unveiled a national plan recently, dubbed Made in China 2025". It is the first 10-year action plan designed to transform China from a manufacturing giant into a world manufacturing power. Made in China 2025 Roadmap for Building China into a Manufacturing Powerhouse is a three decade plan:
China’s Strategy to Become a World Manufacturing Power10
2025 2035 about 2049
Enhancing the manufacturing industry‘s innovation capability, advancing industrialization and
informatisation integration to a new level, and elevating China‘s position
in the global industrial division of labour and value chain
Reaching the medium level of the world‘s manufacturing
powerhouses, raising innovation capability significantly an
enhancing overall competitiveness considerably
Comprehensive strength to rank among the upper echelons of
the world‘s manufacturing powerhouses, a leading
technological and industrial system will be built
2049The 100th Anniversary of the People's Republic of China
Made in China 2025: Nine Strategic Tasks
China’s Strategy to Become a World Manufacturing Power11
Enhancing innovation of the manufacturing industryThis includes encouraging OEM enterprises to shift to designing and exporting own brand products
Advancing closer integration of informatisation and industrializationDevote great efforts to developing smart equipment and smart products,
as well as advancing smart production
Strengthening fundamental industrial capabilitiesStrengthen development of basic core parts and components, advanced basic processes,
basic key materials and basic industrial techniques
Enhancing quality and brand buildingEncourage enterprises to develop brand products with proprietary intellectual-property rights,
and implement action plans to enhance the quality of industrial products
Proactively developing service-oriented manufacturing and producer servicesAdvance innovative business models and business formats, and accelerate the
development of producer services
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Made in China 2025: Nine Strategic Tasks
China’s Strategy to Become a World Manufacturing Power12
Fully promoting green manufacturingStrengthen R&D of advanced energy conservation and environmental protection technologies, and
quicken the pace of transforming and upgrading the manufacturing industry to green production
Actively achieving development breakthroughs in key areasFocus is put on 10 areas (more details on the next slide)
Deepening restructuring of the manufacturing industryPromote traditional industries to move towards medium- and high-end manufacturing
to gradually solve the problem of excessive production capacity
Elevating development of the manufacturing industry to international levelDevote greater efforts to integrating the “bringing in” and “going out” development strategies,
an raise the level of international cooperation
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Made in China 2025: Ten Key Areas
China’s Strategy to Become a World Manufacturing Power13
information and communication
technology industry
new materials and composites
rail transportation
equipment
marine engineering equipment and high
technology ships
biological medicine and
high-performance medical apparatus and instruments
high-end CNC machine tools and robotics
electric power equipment
energy saving and new energy vehicles
agricultural machinery equipment
aerospace equipment
Made in China 2025: Ten Key Areas
China’s Strategy to Become a World Manufacturing Power14
information and communication
technology industry
new materials and composites
rail transportation
equipment
marine engineering equipment and high
technology ships
biological medicine and
high-performance medical apparatus and instruments
high-end CNC machine tools and robotics
electric power equipment
energy saving and new energy vehicles
agricultural machinery equipment
aerospace equipment
To master these ten key areas, China needs competencies in technologies which the European Union
is calling “key enabling technologies”:
− micro and nanoelectronics, − nanotechnology,
− industrial biotechnology, − advanced materials,
− photonics,− advanced manufacturing technologies.
Source: European Union: Horizon 2020 - Key Enabling Technologies (KETs), Booster for European Leadership in the Manufacturing Sector, 2014
The Five Tenets of the Five Year Plan
President Xi Jinping ambitious 13th Five Year Plan to close the middle income economic trap :
– 6.5 GDP growth annually, – increase annual income per capita to reach 12,600 RMB
(approx 1.715,00 Euros), – create 25 million new jobs annually, – reduce the population living in rural poverty by 70 million and through regional
shift support this with policies of urbanization.
– The Hukou Reforms of 2015 already demonstrate an intention to encourage greater flow of talent to secondary and tertiary cities with these developmental clusters serving as growth hubs.
China’s Strategy to Become a World Manufacturing Power15
Chinese Investment Sectors in Europe
Chinese investment sectors in Europe are:− Financial Service− Tourism− Trade Intermediary− Retail− Business Services− Food− Fashion− Household Goods− Pianos− Real Estate & Infrastructure
Development− Infrastructure Operations
− Fixed Assets Leasing− High-End Buildings− Football Clubs− Luxury Yacht Shipyards− Vineyards− Engineering and Manufacturing
“Industry 4.0”− Cars and Car Components− Environmental tech− E-Commerce− Biotechnology
China’s Strategy to Become a World Manufacturing Power17
Chinese Investment Sectors in Europe
Financial ServiceInfrastructure OperationsTrade IntermediaryRetailBusiness Services
China’s Strategy to Become a World Manufacturing Power18
Vivat
Delta Lloyd
Hauck & Aufhaeuser
J&T Finance
Standard Bank UK
Cassa Depositi e Prestiti Reti (35%)
Banco Espírito Santo de Investimento
CaixaSeguros
Legend
Scottish Windfarms WindMW
Euromax Terminal
Parma AirportToulouseBlagnac Airport
MadrilenaRed de Gas
Tirana Airport
Port of Piraeus
Istanbul KumportTerminal
DufercoMercuria(35%)
Nidera
Mercedes-Benz Vertrieb
Hamley Toys
Pizza ExpressHouse of Frazer
Espirito Santo Saude
MP & Silva
SwissportInfront Gategroup
Engineering an Manufacturing„Industrie 4.0)Cars and Car ComponentsEnvironmental TechE-CommerceBiotechnology
Retlan
Chinese Investment Sectors in Europe
China’s Strategy to Become a World Manufacturing Power19
AIM Altitude
Aritex
JOTDeltamarinNorthern
Offshore
NXP
KHF Humboldt Wedag
TAEBroetje
Dematic
Manz(26%)
H.Stoll(27%)
Kion LindeKuka
KraussMaffei
GimaticOLI
LFoundryAnsaldo Energia(40%)
EKOL
Peugeot (13%)
Federal Mogul Sealing Systems
Meta System
Pirelli
Punch Powertrain
BogeWegu
Preh
HiliteALBA
EEW
Bilfinger(watertech unit)
NOVAGO
VOLVO
ElkemREC Solar
JagexBigpoint
Opera Software
Supercell
Linx
LEDVANCE
BPL
Syngenta
Largest Chinese Direct Investments in Germany
Vol. in Mio € Purchaser Seller Target Year
4.121 MECCA International (BVI) Ltd (Midea) Free Float KUKA AG 2016
3.500 Consortium incl. Allianz Capital Partners Terra Firma Tank & Rast 2015
1.600 China Three Gorges Blackstone BCP Meerwind 2016
1.440 Beijing Enterprises EQT EEW Energy from Waste 2016
925 ChemChina Onex Corporation KraussMaffei 2016
751 Fujian Grand Chip Investment Aixtron SE Aixtron SE 2016 (canceled)
738 Weichai Kion Kion (shares) 2012/2013
538 Jiangsu Jinsheng Group Oerlikon Saurer OC Oerlikon 2013
532 Sany Heavy Industry Putzmeister Putzmeister 2012/2013
506 Lenovo Medion/Brachmann Medion 2011
473 Avic 3i Hilite 2011/2014
400 Consortium incl. M.L.S. Electronics Osram LEDVANCE 2016 (ongoing)
386 Hanergy Q-Cells Solibro 2012
324 CITIC Dicastal Cognetas KSM Casting 2011
320 Avic KHD Humboldt KHD Humboldt 2013
300 XCMG Schwing Schwing 2012
291 Ningbo Joyson Preh/DBAG Preh 2011/2012
290 Zhuzhou TMT ZF Friedrichshafen now: BOGE Rubber & Plastics 2013
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In the first six months of 2016, Chinese investment in Germany has alreadyjumped to €10 billion including acquisitions of 37 German companies.
So far in 2016, Germany has been the largest recipient of Chinese investment in Europe (Mercator Institute for China Studies).
Source: http://www.chinadaily.com.cn/business/2016-10/18/content_27092732.htm
Largest Chinese Direct Investments in Germany
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Economic and Investment Environment in Germany
China’s Strategy to Become a World Manufacturing Power22
1%
1%
2%
23%
27%
33%
45%
48%
53%
60%
62%
77%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
investment immigration
other
exchange ratebetween EUR and RMB
high qualified employees
innovation capability
strategic decision of company
improved infrastructureand logistics network
good reputation of "made in Germany"
fledged tax and economic system
Germany's international standing
Germany's geographic location
stable political/ economicrelationship between China and Germany
Source: A Survey of Business Environment for Chinese Companies in Germany, 2015, Chinese Chamber of Commerce in Germany
Difficulties of Chinese Investors in Germany
China’s Strategy to Become a World Manufacturing Power23
Source: A Survey of Business Environment for Chinese Companies in Germany, 2015, Chinese Chamber of Commerce in Germany
7.1%
7.1%
7.1%
8.2%
13.3%
22.5%
22.5%
25.5%
27.6%
36.7%
45.9%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%
others
Anit-dumping and countervailing
IP related issues
local trade protectionism
difficulties in arranging research fundings
HR related issues
bureaucracy
lack of direct access to information
tax issues
difficulties in applying for long term work permit
cultural differences/ management problems
China’s Strategy to Become a World Manufacturing Power24
Challenges and Opportunities for the European High Tech Industries
Europe’s Strategy to Modernize the Industrial Base and Drive the Development of New Industries.
What the European Commission does:
To make sure that Europe leads the current industrial revolution, the Commission uses all the instruments at its disposal to support the modernization and digital transformation of industries, both of their production processes and business models, for the benefits of all Europeans.
It provides an overview of actions undertaken and puts forward new ones to:
– mainstream industrial competitiveness in other policy areas,– maximize the potential of the Single Market, notably through standards and market surveillance,– use the instruments for regional development to support innovation, skills and entrepreneurship,– develop the skills that industries need and facilitate labour mobility,– promote access to critical inputs (energy and raw materials) to encourage industrial investment,– facilitate the integration of EU firms in global value chains.
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EU Industrial policy
Europe’s Strategy to Modernize the Industrial Base and Drive the Development of New Industries.
China’s Strategy to Become a World Manufacturing Power26
CompetitivenessCompetitiveness is a key determinant for growth and jobs in Europe and industrial competitiveness is a horizontal objective
in all EU policies. The Commission monitors competitiveness in the EU and analyses the impact of policy on competitiveness. It also aims to improve the quality of public administration, as an important driver of competitiveness.
InnovationInnovation is a key factor in the competitiveness of European industry. The EU implements policies and programmes
that support the development of innovation to increase investment in research and development, and to better convert research into improved goods, services, or processes for the market.
Key enabling technologiesKey enabling technologies (KETs) are a key element of European industrial policy. They provide the basis for innovation in
a range of products across all industrial sectors. They underpin the shift to a greener economy, are instrumental in modernizing Europe’s industrial base, and drive the development of entirely new industries.
Intellectual propertyThe Commission works to harmonise laws relating to intellectual property rights (IPR) in EU countries to avoid barriers to
trade and create efficient EU-wide systems for the protection of such rights. We work with authorities at all levels to strengthen the enforcement of IPR. We aim to help small businesses access and use IPR more effectively.
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Europe’s Strategy to Modernize the Industrial Base and Drive the Development of New Industries.
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Sustainability and circular economyThe Commission aims to ensure coherence between industrial, environmental, climate and energy policy to create an
optimal business environment for sustainable growth, job creation and innovation. To support this, we have established an ambitious agenda to transform EU economy into a circular one, where the value of products and materials is maintained
for as long as possible, bringing major economic benefits. The Commission also supports European industry in the move to a low-carbon economy and improves the energy efficiency of products through ecodesign legislation.
Corporate social responsibilityCorporate social responsibility (CSR) refers to companies taking responsibility for their impact on society. The Commission believes that CSR is important for the sustainability, competitiveness, and innovation of
EU enterprises and the EU economy.
International aspectsWe help the internationalisation of EU businesses by ensuring a level playing field for them through bilateral,
regional and international dialogues. We also contribute to the process of enlarging the EU.
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Conclusion
Decision makers in politics and business will have to identify adequate responses to the powerful Made in China 2025 strategy.
The following thoughts are inspired on key recommendations by the German Mercator Institute for China Studies.
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Conclusion
China’s Strategy to Become a World Manufacturing Power30
Strengthen on-the-ground information gathering and sharing. Decision makers urgently need more information on China’s industrial policies applied in the context of Made in
China 2025. Industry associations, through their presence on the ground, are in a strong position to improve information gathering on smart manufacturing policies in China.
Increase information through intensified dialogue. Deepening exchange with Chinese smart manufacturing associations, industry partners and alliances as well as policy institutes will help provide early information about policy planning and implementation. In addition,
regular dialogues can serve as a platform for discussing and solving technical issues that do not require decision making at the political level.
Use opportunities to influence standardization processes. The window of opportunity for influencing technological standardization in China is still open. Foreign industry
associations and large corporations should expand their activities and capacities in this regard.
Source: Mercator Institute for China Studies: Made in China 2025 - The making of a high-tech superpower and consequences for industrial countries, 2016
More Information and Sources
One “Made in China 2025”:– https://www.csis.org/analysis/made-china-2025– https://www.merics.org/apple-touch-icon.png/merics-analysen/papers-on-
china/made-in-china-2025/One China’s Investment Strategy:– https://www.bertelsmann-
stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/NW_Chinese_Direct_Investment.pdf
One the European Strategy for KETs:– https://ec.europa.eu/growth/industry/key-enabling-technologies/european-
strategy_enUnderstand the Chinese Business Playground:– http://www.europeanchamber.com.cn/en/publications-position-paper
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China’s Strategy to Become a World Manufacturing Power33
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